Imports

import pandas as pd
import numpy as np
import matplotlib.pyplot as plt
import seaborn as sns
import mplfinance as mpf
import matplotlib.dates as mdates
import datetime as dt

import plotly.graph_objects as go
import plotly.express as px
import plotly.io as pio
from plotly.subplots import make_subplots
pio.renderers.default = "notebook"
pio.templates.default = "plotly_dark"
import gc

import warnings
warnings.filterwarnings('ignore')

plt.rcParams['figure.figsize'] = [12, 8]

Topics cum Notes

L1

topics

A brief list of topics are: - Risk - Insurance - Diversification - History of Finance - Innovation - Behavioral Finance - Debt - Stocks - Real Estate - Regulation - Banking - Futures - Monetary Policy - Endowment Management - Investment Banking - Options - Money Managers - Exchanges - Public Finance - Nonprofit Finance - Purpose of Finance

L2

Var Variance/Value at Risk

Value at risk is a measure used by some finance people to quantify risk of of an investment or of a portfolio and it's quoted in units of dollars for a given probability and time horizon. For example, if it says lets's say 1%, one-year value at risk of 10 million, it means that there is a 1% chance that the portfolio will lose 10 million in one year.

Stress Testing

The stress test is a test usually ordered by government to see how some firm will stand up to a financial crisis.

Stress testing is a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations. Such testing is customarily used by the financial industry to help gauge investment risk and the adequacy of assets and help evaluate internal processes and controls. In recent years, regulators have also required financial institutions to carry out stress tests to ensure their capital holdings and other assets are adequate.

S&P 500

S&P 500 is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices. S&P 500 is widely regarded as the best single gauge of large-cap U.S. equities.

The S&P 500 index is a free-float weighted/capitalization-weighted index. As of August 31, 2022, the nine largest companies on the list of S&P 500 companies accounted for 27.8% of the market capitalization of the index and were, in order of highest to lowest weighting: Apple, Microsoft, Alphabet (including both class A & C shares), Amazon.com, Tesla, Berkshire Hathaway, UnitedHealth Group, Johnson & Johnson and ExxonMobil.

snp = pd.read_csv('Data/GSPC.csv', parse_dates=['Date'], index_col='Date')
snp.head()

	Open	High	Low	Close	Volume
Date
1927-12-30	17.660000	17.660000	17.660000	17.660000	0.0
1928-01-03	17.760000	17.760000	17.760000	17.760000	0.0
1928-01-04	17.719999	17.719999	17.719999	17.719999	0.0
1928-01-05	17.549999	17.549999	17.549999	17.549999	0.0
1928-01-06	17.660000	17.660000	17.660000	17.660000	0.0

px.line(snp, x=snp.index, y='Close', title='S&P 500')

...> iv> 2022-12-16der-box-sizing text_cell rendered" markdown="1"> 134.509995ll" markdown="1"> 3852.360107_render border-box-sizing rendered_html" markdown="1"> 2022-12-16yncratic Risk

-0.014579> -0.011138class="cell border-box-sizing text_cell rendered" markdown="1"> v> 2022-12-19ll" markdown="1"> 132.369995l_render border-box-sizing rendered_html" markdown="1"> 3817.659912v> 2022-12-19

-0.015910class="cell border-box-sizing text_cell rendered" markdown="1"> -0.009008cell border-box-sizing text_cell rendered" markdown="1"> class="cell border-box-sizing text_cell rendered" markdown="1"> 2022-12-20l_render border-box-sizing rendered_html" markdown="1"> 132.300003ossibility that an individual or other entity will experience losses due to factors that affect the overall performance of investments in the financial markets. Market risk cannot be eliminated through diversification.

3821.620117

2022-12-20lass="cell border-box-sizing text_cell rendered" markdown="1"> -0.000529cell border-box-sizing text_cell rendered" markdown="1"> 0.001037order-box-sizing text_cell rendered" markdown="1"> class="inner_cell" markdown="1"> 2022-12-21sk, investors and analysts use the value-at-risk (VaR) method. VaR modeling is a statistical risk management method that quantifies a stock or portfolio's potential loss as well as the probability of that potential loss occurring.

135.449997

3878.439941ass="cell border-box-sizing text_cell rendered" markdown="1"> 2022-12-21ell border-box-sizing text_cell rendered" markdown="1"> 0.023809order-box-sizing text_cell rendered" markdown="1"> 0.014868cell" markdown="1"> class="text_cell_render border-box-sizing rendered_html" markdown="1"> 2022-12-22

132.229996lass="cell border-box-sizing text_cell rendered" markdown="1"> 3822.389893ll border-box-sizing text_cell rendered" markdown="1"> 2022-12-22der-box-sizing text_cell rendered" markdown="1"> -0.023773ell" markdown="1"> -0.014452ll_render border-box-sizing rendered_html" markdown="1"> syncratic risk can be thought of as the factors that affect an asset such as the stock and its underlying company at the microeconomic level. It has little or no correlation with risks that reflect larger macroeconomic forces, such as market risk. Some examples of idiosyncratic risk are: - Business risk is an idiosyncratic risk associated with the nature of a business along with its competitive landscape and market. - Operational risk arises when, for example, a machine breaks down, a factory catches fire, or a key employee dies. - Financial risk relates to a particular company's capital structure and financial exposures. - Regulatory/legal risk has to do with the possibility of new laws or regulations that can harm a firm's bottom line or ability to operate freely.

Business risk is an idiosyncratic risk associated with the nature of a business along with its competitive landscape and market. - Operational risk arises when, for example, a machine breaks down, a factory catches fire, or a key employee dies. - Financial risk relates to a particular company's capital structure and financial exposures. - Regulatory/legal risk has to do with the possibility of new laws or regulations that can harm a firm's bottom line or ability to operate freely.

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Contents

Imports

Topics cum Notes

L1

L2

Var Variance/Value at Risk

Stress Testing

S&P 500

Central Limit Theorem